Personal Communications Devices LLC has won approval of a sale of its assets to stalking-horse bidder Quality One Wireless LLC after an auction was canceled for lack of competing bids.
Judge Alan S. Trust of the U.S. Bankruptcy Court for the Eastern District of New York in Central Islip on Oct. 10 approved the sale of the distributor of wireless communications devices.
Debtor counsel Emanuel C. Grillo of Goodwin Proctor LLP said former principal Philip Christopher made an offer, but PCD deemed the offer to not be qualified. He added the initial $105.25 million price for the Quality One deal had "increased by several million dollars" following negotiations with the official committee of unsecured creditors, but Grillo did not provide an exact figure. The purchase price remains subject to a working capital adjustment.
The creditors' committee had objected to the bidding procedures for the sale, asserting the quick sale process originally proposed by the debtor would benefit only secured creditors and insiders. The committee said second-lien lenders and private equity firms DLJ Investment Partners LP and PineBridge Investments together own 61.2% of PCD and hold a portion of $71.25 million in second-lien claims.
The committee said those lenders have no incentive to pursue a plan that would benefit unsecured creditors. The committee said the debtor should be forced to take more time in its sale process to consider alternative bids.
As a result, PCD modified its bidding procedures to give prospective bidders an additional 10 days to make offers.
Rival bids due by Oct. 8 had to include a $4.5 million deposit and had to repay both debtor-in-possession financing and first-lien debt.
Had PCD received at least one qualified competing bid, the company would have held an auction on Oct. 9, with an initial overbid of $4.55 million. Subsequent offers would have had to increase in increments of at least $50,000.
Quality One would have received a breakup fee of $3.5 million plus expense reimbursement of up to $1 million if it had lost the auction.
Trust on Sept. 13 authorized final use of $46 million in DIP financing from prepetition lenders led by administration agent JPMorgan Chase Bank NA. PCD won use of $40 million of the DIP under an Aug. 21 interim order. Wells Fargo Capital Finance LLC is syndication agent on the loan, and Bank of America NA is documentation agent.
The DIP, which includes a $5 million swing line of credit, gradually will roll up the $33.98 million outstanding on a $115 million first-lien credit facility, giving it about $12 million in new money.
The loan, priced at an alternate base rate plus 6.75%, will mature 65 days after the DIP's closing date. On default the interest rate would increase 200 basis points.
The loan sets various deadlines from the petition date, including winning approval of bid procedures within 24 days, receiving at least one qualified bid within 50 days, entering a sale order within 52 days and consummating a deal within 65 days.
PCD acts as an intermediary between foreign wireless device manufacturers and wireless carriers such as Verizon Wireless and Sprint Corp. The company offers more than 50 phones from 12 companies in China and South Korea. PCD's services include working with vendors and service carriers to provide product development, delivery, quality control and post-sales support.
PCD filed for Chapter 11 on Aug. 19, citing an inventory building, litigation and shrinking profits as larger makers of mobile devices continued to grow. The debtor distributes nonpremium and niche wireless devices and handsets.
Founded in 1984, PCD has 189 employees and 85,000 square feet of leased warehouse space at its headquarters. The Hauppauge, N.Y., company also has offices and warehouses in Brea, Calif., and Toronto.
Management and private investors led by PineBridge Investments purchased the company in July 2008 from UTStarcom Inc., which had acquired it in 2004 from Audiovox Corp., now known as Voxx International Corp.
In 2012 the company had $1.6 billion in revenue but lost $16.9 million. The company's Ebitda had averaged $50 million for the previous four years.
PCD listed $247.95 million in assets and $284.99 million in liabilities in court papers.
Quality One counsel Joseph J. Wielebinski of Munsch Hardt Kopf & Harr PC was not available for comment.